Will philanthrocapitalists and hyperagents really change the world?

"As philanthropy enters a second golden age, real social change is getting lost in the hype of market-based giving," writes Linsey McGoey in Fortune.

The first 'golden age' was the 19th century, the time of Andrew Carnegie and John D Rockefeller Sr., McGoey reminds us. According to her, "From Carnegie’s spending on public libraries to Rockefeller’s investment in biomedical advances, their giving helped to shift charity from the dispensing of alms in a largely unsystematic manner to a business in itself, overseen by paid philanthropic advisors".

One trend in the ‘second golden age’ that is significant, she suggests,  is 'philanthrocapitalism'. This she summarizes as "a more muscular philanthropy that seeks to combine profits with poverty alleviation".  She is not entirely accurate. Matthew Bishop and Michael Green, who coined the term, described the concept succinctly as "philanthropy led by the world's wealth creators... applying business techniques and ways of thinking to their philanthropy".

Paul Schervish, cited several times by Bishop and Green, is the scholar who has, more than any other, studied the philanthropy of US wealth creators. He described one of the characteristics wealthy philanthropists' as 'hyperagency'. Hyperagency means “… being able to construct a self in a world that transcends the established institutional limits and, in fact creates the limits for others”.

Schervish also points out that these hyperagents are the 'producers' of philanthropy in a market where the currency is not money but emotions, and the producers are not troubled by competition.

Another trend in the second golden age, according to McGoey is the effective altruism movement, championed by Peter Singer. Singer has declared Warren Buffett and Bill and Melinda Gates  “the most effective altruists in history.”

McGoey's concern is that the hype around the second golden age is ignoring questions about its effectiveness. "Its progress," she says "often seems to be measured and underpinned by self-sustaining feedback loops". Giving in the US has remained stubbornly around 2% of GDP. 

Foundations are a growth industry in the US yet extreme poverty , meanwhile, continues to rise.

"Today’s philanthrocapitalists see a world full of big problems that they, and perhaps only they, can and must put right," Bishop and  Green wrote. 

Another commentator, Michael Edwards, sets that notion to rights in 'Small Change: Why Business Won't Save the World', his rebuttal of Bishop and Green’s book. Edwards believes that “business thinking and social transformation operate on entirely different logics”.

Finally, McGoey points to an alarming paradox from the first golden age which, hopefully, is not destined to be emulated in the second. She quotes from David Nasaw, Carnegie’s biographer, “Carnegie … became, if anything, more ruthless in pursuit of profits once he had determined that those profits would be distributed during his lifetime.” Then she juxtaposes this tweet from Martin Shkreli, “I donated a total of $5,000,000 to various causes recently. Looking forward to telling you all about it.”  Shkreli is the former hedge fund trader, who was vilified for raising the price of Daraprim - a drug that fights parasitic infections in AIDS and other immune-supressed patients - by 5,000%

How do you get the rich to support the arts?

The typical Aussie billionaire finds his fulfillment in watching himself climbing up the Rich List.

So said art and film critic John McDonald, adding he could name only two out of Australia's 39 billionaires who had “a cast-iron commitment to art.”

His turn of phrase is interesting, if innocent. A look at the list of Australian billionaires reveals that the majority are - if not casting iron exactly - certainly engaged in mining or construction. Digging holes and building towers, I would suggest, tend not to be the occupations of aesthetes and art lovers.

Much of the rest of McDonald's article relates to corporate rather than individual support for art. However, it is his suggestion that the rich should support the arts that concerns me. I agree that it would be nice if there were more support for the arts. Equally, I believe it is important that we do what we can to encourage philanthropy  of any kind from the wealthy and not so wealthy more generally. However, there is a another side to this equation. That is the side of the beneficiaries of philanthropy - whether they be the arts and artists, or other sections of our civil society.

The responsibility of those of us who work for civil society is to enter into a positive dialogue with the wealthy and make the case that we are worthy of support. McDonald makes these points in the final paragraphs of his piece. "Many donors, large and small, complain that they have been treated with rudeness or a lack of consideration," he says. "Sending out letters and starting campaigns will never do the trick."

Of course not. What we need to do is investigate and understand the minds of our potential patrons. The comment I made above about digging holes building towers was intended as a clue. To start with we need to identify whom the most likely supporters will be. What are their interests and what do they value?

Interests amongst the first and second and second generation that dominate the Australian very wealthy tend to remain close to the source of their wealth.  Their preoccupation is with the industries from which their money has come and they hope will continue to come. Miners and builders tend not to be very interested in the arts. However, some are philanthropic. Of the Aussie billionaire miners, Andrew Forrest gives generously to indigenous programs.  Of the billionaire developers, Frank Lowy has given time and money to football. There are readily found clues in the background of each which point to these preferences. Their personal stories have been told again and again in the media.

The two billionaires whom McDonald specifically mentions as supporters of art are are Kerry Stokes (media) and Kerr Neilson (finance). Both are art collectors, the latter owns a gallery. In my view he unfairly overlooks the Pratts (Packaging) and Packers (Media and Gambling). Both are billionaire families who have made substantial contributions to performing and visual arts over decades. In fact, he dismisses James Packer's $65 million commitment to the arts as "a sweetener" to a property development - Barangaroo - in which Packer has a substantial interest. This, though, is to overlook the history of involvement in the arts of other members of the Packer family.

Family background has its influence on philanthropy. James Packer could have linked his sweetener to indigenous matters or to sport, either of which would have gained him brownie points with the government. Philanthropic decisions are rarely made unilaterally. The Pratt family link to the arts can be discovered through the biography of its principal characters.

Incidentally there is an honorable list of Australia's not quite, or once-but-no-longer billionaire families and individuals who do support the arts.  The Balnaves (media), the late Elizabeth Murdoch (mother of media magnate, Rupert), the Fairfax family (another media owning family), the Myer family (retail) and the Belgiorno-Nettis family (civil engineering) John Kaldor (fabric), Pat Corrigan (freight).

My point?  We enlist the wealthy by identifying those who are most likely to share our values and beliefs, developing relationships with them and offering them opportunities to support our work where it most seems to match their own interest. In my view there is nothing to be gained by complaining about or hectoring those who may have other genuinely held values, beliefs and interests.

The very, very rich got even richer

Wealth-X and UBS have just released their 2014 research into the world's billionaires. 

The numbers have increased, which will surprise nobody who subscribes to Thomas Picketty's argument that you and I will never catch up to the wealth of people who are already rich.

There are now 2,325 people with a net worth of at least $1 billion this year – 155 more, or a 7% increase, from 2013. They collectively control $7.3 trillion dollars in total wealth. Jacob Davidson, in Money put is, "that means a group of people about the size of a typical suburban high school student population could fund the entire United States defense budget for 14 years." 

The report provides some interesting tidbits for those who are interested in the lives of the rich and famous. For example it offers a month by month billionaires' social calendar, noting the events they are most likely to attend. The US Masters and PGA Championship feature prominently . But also, at least 23% of the world’s billionaires are likely to attend at least one, if not more, of the many elite art shows held annually around the world.

However, more comforting is the discovery that more than 70% are active in the philanthropic sphere. Excluding future pledges, the report says "billionaires, on average, donate just over US$100  million cumulatively over their lifetimes. This is equivalent to 3% of their net worth – more than the average  billionaire’s real estate holdings".

Topping the list are Chicago's billionaires. 100% of these billionaires are active philanthropists. New York and Los Angeles follow at 96%. Riyadh, Saudi Arabia at 95% beats Singapore's 94% of philanthropically inclined billionaires. Only 85% in London show interest in philanthropy.

Education, and Higher Education are top two on their list of preferred causes. The Arts come fourth after Health. Religion, unlike for the population more generally (most studies show) falls bottom with only about 4.5% supporting church, temple or mosque.

Chicago's billionaires give especially towards improving living conditions and the developmentof their city. Those from Tokyo, in contrast, show interest in disaster relief and the environment.

Also just published is a new book by Brookings Institute academic Darrell M West 'Billionaires: Reflections on the Uppercrust.' One of this book's cautions is that we need to be aware of new models of billionaire gift giving. Cultivating wealthy individuals requires considerable tact, persistence, personal contacts, and know-how, he rightly notes. Being results oriented, many billionaires focus on concrete objectives, and they want demonstrable impact for their money.

West cites Matthew Bishop Michael Green, the authors of Philanthrocapitalism . They describe how the very wealthy bring skills and tools from the business world to their philanthropy. They push nonprofits to focus "in some cases for the very first time" on specific outcomes for their work and performance metrics.

He could also have cited Paul G Schervish, who coined the term hyperagency for the behaviour of the very wealthy. As he describes it:

"Hyperagency  is the ability to exercise effective control over the conditions and circumstances of life rather than merely living within them. Hyperagency, in contrast to agency, means that the wealthy are able to construct a world that suits their interests". Schervish, PG & Herman, A 1988, 'Empowerment and Beneficence'.

In a later work, Schervish - who has studied the philanthropy of the very wealthy in United States in greater depth that anyone - has also identified 13 strategies followed by philanthropists in what he likes to call the New Golden Age of Philanthropy. (Schervish, PG 2000, 'The modern Medici')

Theresa Lloyd and Beth Breeze have recently published a study of why rich people in the UK give to charitable causes.Lloyd, T & Breeze, B 2013, 'Richer Lives: Why Rich People Give' 

For Australians, a work worth reading on what motivates major donors (though not billionaires per se) has been written by  Wendy Scaife, Katie McDonald and Sue Smyllie (2011 'A Transformational Role).

Data protection spells disaster for fundraising

I was struck by the headline of an item in Third Sector. "EU data protection plans 'potentially disastrous' for charity fundraising" it proclaims.

The article went on to quote from a report from a fundraising agency "Fundraising depends on big numbers and economies of scale; by generating enough new donors, the cost of finding and keeping each one gets small enough to make donor recruitment profitable." My question is, "Does it?" 

Without wanting to denigrate the commitment of those of you fundraisers who specialize in mass appeals, my understanding of successful fundraising leads me to quite the opposite conclusion. Could it not be that instead of disaster, perhaps restrictions on the use of lists, telephone campaigns and direct mail would be a victory for effective fundraising?

Effective fundraising, it is generally reckoned even by those who practice more mass-market approaches to fundraising, requires building a relationship. So what if suddenly we switched our effort from list-buying, mailing and calling segments, postcodes and sociodemographic profiles? Instead, what if we spent our time identifying and researching people who  really are connected and close to us? Who are part of our real social constituency not just the product of data analysis. Our existing donors, our volunteers and their families and friends? And, those that have been touched by and share in our causes? What if we actually took time to talk personally and directly to these people? What if we got to know them on a one to one basis? What if we asked them to become part of a network of personal connections? What if our contact with them was social, face-to-face and responded to their interest and passion for what we do uniquely, valuing them as a person instead of as a data point?

That, of course is the basis of major gift fundraising. It is also the way to successfully approach business partnerships and to get support from trusts and foundations.

However, if we step back in time it was also the way that philanthropy originally was born. Mass-market fundraising only really started in the early part of the last century. Street fundraising originated with the YMCA and wasn't popularised until the 1980s by Greenpeace. Direct mail fundraising is really only a post World War II phenomenen. Its precursor direct mail marketing began the 1900s. Telephone fundraising, as I'm sure many of you know came much, much later.

Prior to these, fundraising for social causes including the arts and education was achieved by personal connection between social activists, volunteers and donors. The main fundraising tools were events of various sorts including balls, concerts and lectures. Fundraising letters were written personally -think of Mrs Jellaby in Dickens' Bleak House. Other forms of  eighteenth and nineteenth century fundraising also included financial tools and instruments curiously similar to those that we describe as "new philanthropy". The significance of any of these older forms of fundraising is that they involved networks of individuals interacting viscerally, personally and socially.

So, if suddenly, governments introduced regulations that limit our ability to buy lists, to mail and telephone people whom we don't know, will that really be such a disaster?

Has digital killed the donor pyramid?

A fascinating debate has erupted between two important names in fundraising.  Claire Axelrad is the proposer. Andrea Kihlstedt the opposer.  The proposition? That social media has killed the donor pyramid.
You know the pyramid?  Legacies (or "ultimate gifts") at the top and one-off, first time donors at the base. 

Claire milked the pyramid metaphor for all it was worth in her opening salvo. "They’re where people go to die".  Though, perhaps her more balanced comment was: “The pyramids were built in Egypt. On the backs of slaves. Nobody’s got 100,000 workers (aka direct-mail donors) building a solid pyramid anymore."

Andrea's riposte referenced Mark Twain that "reports of its [the pyramid's] death have been greatly exaggerated"  Andrea continued, "When organizations use the donor pyramid to focus their attention on raising large gifts, that’s just what happens — they raise large gifts."

It emerged in the debate, that both Claire and Andrea agree on two things.  A relief to me because they are things that I firmly believe as well: 

1. Major gift fundraising is extraordinarily important.
2. The Pareto Rule (80/20) is alive and well.

So why the furore? In my view, Claire and Andrea start from different places. Claire references research done by Adrian Sargeant and Penelope Burke on the attrition rates of first time donors (they're the ones at the bottom of the pyramid).  She then, correctly, proposes that social media provides great ways for nonprofits to engage with people.  And, in part, she is saying that attrition is avoided through engagement (aka stewarding) donors.  Social media is effective at engaging first time donors. But, actually, she expands this by saying that social media is effective at engaging many more than first time donors.  It can engage all donors, at any of the traditional levels and non-donors alike. Who would argue with that? (Claire proposes a vortex model for all this high energy, swirling engagement.)

Andrea, though, suggests the pyramid has a quite different role. In my interpretation, her view of the pyramid is really as a planning model. She says the pyramid "makes sense of complexity by reminding us to focus a disproportionate amount of attention to the precious few donors who can breathe life into our mission in the way that small donors, even collectively, can not".  And, frankly, I agree with her.

Yes, it is vitally important to attract and engage with first time donors. (Actually, that would better read, "attract and engage with non-donors") . And social media offers great ways of doing that.  Via Twitter, LinkedIn, Facebook, Google+ and even texts, as Claire says. However, for most organisations I know, the truly transformative, target-reaching mouth-watering gifts and bequests have come through carefully planned relationships with a few carefully identified and researched individuals and organisations.  Those represented by the top of the pyramid.

And yes, the swirling vortex impacts and involves those at the top - and those that influence them too. So for heaven's sake let’s have both the pyramid and the vortex. But please make sure they both work together.  Or else, Claire prediction will come true.  The vortex will "crumble" the Pyramid " … slowly, surely … until there [is] nothing left but an empty frame."  And then where will fundraising be?

"You mean, there is philanthropy in India?"

I am just back from a trip interviewing philanthropists in India.  You may wonder what I am interested in Indian philanthropy for. 

One reason is the depressingly frequent and blunt question I often get asked: "You mean, there is philanthropy in India?".*
I have commented before, (Is US Philanthropy exceptional?)that I think it is a mistake always to think of United States as the model of philanthropy. Philanthropy is a comparative infant United States compared with the rest of the world (India's philanthropy long preceded America).  To counter these misapprehensions here are some examples of Indian philanthropists I have met.

Example one, is a husband-and-wife team who started their own foundation after building a successful investment advisory service. Through the foundation, they apply their investment skills to advising,  investing, and fundraising for a range of social activities. Three of the social initiatives that they were actively involved in when we spoke were, firstly, an orphanage for children of sex workers in Mumbai. Second, an organisation managing rural ashrams for treatment and rehabilitation of leprosy patients, and other disabled or marginalised people. And, third, an initiative that ran education programs for children Mumbai’s slums. All of these three were initially started and run by local social entrepreneurs.

My second example, is the second generation family owner of a mining company.  His family foundation has focused on implementing  a social model enabling the families of the company’s workers themselves to manage all aspects -  health, education, sanitation and sustainability -  of  their own  village communities. This, self-sufficient management model is being extended to 300 or more similar industrial villages across India. From, this initial focus on village management has grown a larger commitment to the management of wider regional ecosystems. As part of this wider initiative, the foundation is now also building a university, which will provide research and training specific to the region’s challenges. The region is the poorest in India.

A third philanthropist whom I interviewed is the founder of one of India's most successful IT companies.  We spoke initially about the philanthropic foundation arm of the international business he founded, which supports health, education, culture, and the destitute. As well, it invests in rural development of some of India’s poorest and hardest to reach areas.  Later, more reluctantly, he was encouraged to talk about the substantial gifts he and his wife personally make to universities in India and abroad. And, also their quiet giving to India wide projects in education and sanitation.

Of others I have spoken to, one was the representative of a third-generation philanthropic family. Noteworthy, was her commitment to her personal philanthropic giving to arts and education quite separate from the family's traditional corporate philanthropic support of health, education and the environment.

Two other individuals I met had made fortunes from international careers in finance.  Both, with their wives, had made their personal  commitment to give away at least 50% of their wealth.

It's way too early to draw any specific conclusions from this small sample. I intend to interview 20 or more others. However, they and other conversations that I continue to have confirm my view that philanthropy is vibrant and strong in India.  The fact is that philanthropists in India have for centuries founded universities, schools and education programs, hospitals and healthcare and provided housing and facilities, not just for workers but entire communities.

It is, I suggest, in societies closer to home, with isolated and commendable exceptions, that a culture of philanthropy has yet to take deeper root.



*The research will also contribute to a PhD in philanthropy at the Asia Pacific Centre for Social Investment & Philanthropy at Swinburne University)

Philanthropy repackaged for bankers

I have just attended the Asia Venture Philanthropy Network 2014 Conference (AVPN2014).  AVPN began in 2012 as an extension to the European Venture Philanthropy Association.  I blogged on the inaugural conference last year and pronounced myself an enthusiast.


What has happened since then and how is my enthusiasm faring? Without wanting to seem a Pollyanna-ish, I confess my enthusiasm remains. Who could not fail to be enthused by a forum where speakers made comments such as these:

• "The word can't means we haven't thought hard enough"
• "Can't means opportunity"
• "Philanthropy is about good people who won't take no for an answer"

The energy and commitment of 380+ attendees from 30 countries (the official count said 29 but I had been counted as from Australia which I'm not! I attended from New Zealand) was palpable.

Last year, I reported a comment that venture philanthropy has been around for aeons. I reckon that still is an accurate statement. A friend who was also attending made the apt comment that "venture philanthropy is philanthropy repackaged for bankers". I don't want to suggest that's a negative. Far from it. But I think that it is a reminder that philanthropy has existed for millennium and in all cultures of the world. The keynote speaker, an Indian banker, spoke of the influence on his personal philanthropy of America, of Islam, of Buddhist meditation. Through these influences he reached a final conclusion, "the only thing enduring we can do in the world of business is the impact that we make on society". Another banker there noted wryly, "I never read a book called "The Great Businessmen of the 18th Century". He added that "the only way to leave a mark is through things that create social change".

My guess is that around two thirds of the delegates present had come from the world of banking and finance. So therefore, yes – it does seem as though venture philanthropy is philanthropy repackaged for bankers. Now is that a bad thing? No, far from it. First of all,  the world of bankers is a world of money and finance. What is its that nonprofits and charities around the world most are mostly seeking?

It is precisely that money and finance which bankers are trained and skilled at accessing. The skills that they bring to philanthropy include assessing, analyzing and measuring risk and impact. The world from which they come requires them to ask questions and draw conclusions which inform hard decisions. Are these not people whom you would want on your team? So what if they re-frame the language of gift and good as investment and impact. Any good fundraiser (or banker) will tell you that the way to successfully negotiate a deal is to see through the eyes, to walk in the shoes, to talk in the language of the other party. So learning the language of finance - or learning the language of venture philanthropy - is important for nonprofits who plan to tap into this new opportunity.

But for those of you that are nervous of a language that seems to be based on numbers, ratios and percentages I can pass on other heartening news. A meme of the conference was that, at the end of the day, most investment (read 'donation') decisions are judgements made on the basis of people. People give to people, the old saying goes among fundraisers, and people invest in people.

Another heartening meme was that stories, especially stories told by video or film  are as - if not more - effective and valuable as statistics, percentages and ratios to demonstrate convincing success and impact.

You will hear more of Asian Venture Philanthropy and I would encourage you to embrace it. On the basis of the energy and commitment that I again experienced at AVPN2014 I am convinced it has the potential to achieve significant social change. Even if it is philanthropy repackaged for bankers it is your job to open the package.

What is a charity regulator for?

What's a charity regulator for? And should we have one? Is a charity regulator the same as a charity evaluator? And if not what is a charity evaluator for?  Some thoughts have been rattling around my head and I am curious about what others think.
Australia and New Zealand are relatively newcomers to charity regulation. Canada and USA don't have any.  The grandfather of them all is the Charity Commission of England and Wales founded in 1853. It has been a lot in the press these days. It seems almost nothing it can do will keep everybody happy. Is it a policeman? It is a champion for charity? Should ask questions, be provocative, or simply, quietly and effectively 'regulate' the sector?

Meantime what are charity evaluators such as Guide Star, Charity Navigator and Give Well supposed to do? How do you in fact evaluate a charity? Do you look at its overheads? The proportion of donations that reach beneficiaries? Should its reserves be under the microscope? The Chief Executive's salary?

There are a handful of academic papers on charity regulation that are worth a read. One such has the nice title 'Light-handed charity regulation'. Wouldn't that be a nice idea some of you might say. However, for me it was useful in obtaining an overview to answer my opening question.

Regulation, in essence, is required to provide transparency and confidence in the charity sector to the public. The obvious analogy is a corporate regulator which ensures that investors in publicly listed companies can make appropriate decisions before risking their money. However, in a sense everyone's money is at risk with charities. Charities enjoy a privileged position with regard to not paying some taxes. Likewise donations to charities are privileged by the tax system. So it is in the public interest to ensure that charity is bona fide and the public's trust and money is not misplaced.

However the question of proportionality and the burden of regulation frequently arises in discussions. My bias on this question is reflected in my liking for the title of the academic paper above. That is because I believe that 90+ percent of those who devote part of their life to volunteering or working for charities nonprofits do so with noble intentions. Yes of course there are aberrations and rip-offs. But I wonder if we put these against the aberrations and rip-offs in the private sector which would be the more numerous and the greater in the value gouged?

Let's turn to charity evaluators. My understanding is that they are for enabling potential donors to get a look at certain key criteria regarding the charity's performance in order to help them make choices. The challenge here is what criteria and how to evaluate them?

It was with some relief that the sector recently read that three largest US evaluators now recognise that overhead is a poor measurement of a charities performance.

But what is a good measurement of a charities performance? And can you apply that measurement to each and every charity? Such is the diversity of the charity world, I struggle to think of a single measurement which could have universal application. Then there's the wider argument of whether quantitative measures provided effective evaluation? Or whether quantitative stories from beneficiaries and others on the ground are best?

I'd be delighted to hear and read what you feel because I think this is too important an issue to be left without debate.

Is US Philanthropy exceptional?

Is US philanthropy exceptional and is it unfair to judge Australia against US standards for wealth and philanthropy? Those were two questions posed in media I read last week.

"We overdo this thing about philanthropy because we don't compare with the Americans. There is no one with money in Australia if you compare us to the wealth in the US," said Harvey Norman chief, Gerry Harvey in TheAustralian. 

My friend, Sabith Khan posed the question, "Is US philanthropy exceptional?" in his blog The Clockwork Muse.   My response? US philanthropy is not exceptional and we do ourselves a disservice by thinking so.  Yes, it involves institutions which are native to the USA - such as the US tax treatment of donations.  But the US concept of philanthropy was inherited and remains consistent with other, much older cultures including the Islamic culture of giving which in turn spread to Europe around the 13th century.  Many of the institutions of philanthropy in the US were adopted from Britain. Among the institutions inherited from Britain was the legal concept of 'charity' which is based on the Elizabethan statute of 1601. 

British philanthropy was well developed in the nineteenth century at the time that it was only beginning to take root in the US. Its development from Tudor times to the early nineteenth century is described by the two great histories of British charity written by WK Jordan and D Owen. Reduced to its essence it is a tale of the emerging haves recognising a responsibility for - even a self-interest in - alleviating poverty and providing better education and health.  Many of the ways in which 18th and 19th century British philanthropists met these challenges were equal in their innovation to today's so called, "new philanthropy".

The newly wealthy US industrialists, moved by similar concerns about the welfare of the communities from which their fortunes had been created, looked across the Atlantic for ideas.  Some such as Andrew Carnegie and George Peabody were active in both Britain and the USA.

Some of the significant differences, especially the significantly higher levels of donations by US taxpayers stem from the era of World War I and its aftermath. By that time the British state had begun to take more responsibility for welfare and the relief of poverty.  For example, the old age pension was created for Britons in 1908.  After the War, under the influence of the Fabian movement, the British government took further responsibility for education, culture, health, welfare and religion. The influence of the Fabians was significant in the development of these social institutions in Australia and New Zealand too.

Conversely, in the USA much of this responsibility for welfare and poverty was taken up by philanthropy - supported, nonetheless, indirectly by the state through the generous tax treatment of philanthropy.  Tax rebates on philanthropy were created in 1913 when income tax was first introduced in the US. Olivier Zunz describes US philanthropy as "self-taxing for the common good" and cites Tocqueville who talked of it in his descriptions of Jeffersonian (early 19th century) America, as "self interest properly understood". (Zunz O, 2012, Philanthropy in America: a History, Princeton University Press, Princeton).

Britain has no such direct tax relief on charitable donations though relief is available to a donor who "covenants" a regular payment to a charity. Instead through Gift Aid, the charity receiving a donation also can claim an additional amount equivalent to the tax payable by the donor on her donations.

In contrast, however, Australia actually preceded the US by introducing tax deductibility for gifts to charity as early as 1907 in Victoria.  Tax deductibility was enacted federally in 1915. So in that regard, Australia cannot claim to be different from the USA.*

What about wealth, as suggested by Gerry Harvey?  The following data from Wealth-X Ultra High Net Worth Report ought to give pause for reflection. The USA has 60,280 UHNWIs (i.e. with over $30 million financial assets) with an average worth of $133 million.  Australia has 3,350 worth on average $122 million.**   As percentages of their respective populations, UNHWIs represent 0.019% of the USA total population, 0.015% of Australia.*** Oceania saw the greatest growth in UHNW population, with an increase of 5.9%, largely driven by the continued growth of Australia. That excuse is disappearing as fast as the wealth gap is narrowing!

  

*New Zealand also offers tax relief on donations though until recently it was capped at a very low level.

**New Zealand 485 worth $126 million. UK, 10,515 worth $126 million.

***0.011% of New Zealand and 0.017% of UK population.

Is this any way to fundraise?

You might not go quite as far as Manuela Hoelterhoff's recommendation  in Bloomberg, "City Opera’s Board Should be Pilloried”, but you do have to wonder about the board of New York City Opera.

In early September this year, City Opera, New York’s number two opera company announced that it would be forced to cancel most of its current season and all of its next season if it failed to raise $20 million by year’s end; the first $7 million was needed by end of September. On Oct 3 the company filed for bankruptcy.

Apparently they were persuaded by one of the development team to raise $1 million of this via Kickstarter. The Kickstarter crowd funding closed $700,000 short.  What on earth let the board and CEO to believe that any of this crisis fuelled fundraising was possible, especially in the light of their past performance?  If fundraising is about relationships, trust, good stewardship and knowing your donors and prospects, what follows is a story of how not to fundraise.

Much of the back story is told in the Metropolitan Opera Guild's Opera News. The author describes it as, "… an epic saga of economic hardship, mismanagement and just plain bad luck". Money problems had dogged City Opera throughout its history. Even in its heyday, under the general directorship of Beverley Sills, the company racked up a $3-million deficit. Yet Sills was a consummate fund raiser as well as a terrific artistic leader. She worked her social connections for everything they were worth. "She knew who had money and knew who would give it," according to one person who worked with her. "And she had no problem asking anybody for it."  She was the face of the company — and she knew it," said another former employee. The donors who gave to New York City Opera were giving money to her, someone whom they trusted and respected. Unfortunately none of her successors had the same strengths at fundraising.

But there was an endowment. In 2003, City Opera was sitting on an endowment of $57 million. That seemed like insurance against hard times ahead. But it didn't last for long.  As the New York Times  noted by 2009 City Opera had raided these funds.  They had been reduced to $16 million, to pay off debts and cover operating expenses. The practice is known in the US as endowment invasion - Wikipedia gives some background. Another egregious recent example of endowment raiding was Brooklyn’s Long Island College Hospital.

[For more on the endowment read this story in The New York Times published after this blog was originally written]

The board's penultimate appointment as CEO was Gerard Mortier, a former artistic director of La Monnaie in Brussels, the Salzburg Festival and Paris Opera. In each of his previous roles Mr Mortier had been well insulated from the pressures of box office and fundraising by the very, very generous government subsidies that were the norm in Europe at the time. Mortier resigned in November 2008 at the height of the Wall Street crash on discovering that a promised budget of $60 million was a chimera. According to the New York Times  the board had counted on his name  and help in fundraising to make the larger budgets he was asking for possible:  “The board understood they were going to work closely with Gerard towards the raising of $60 million.”

The present CEO, George Steel, was untried in the complex and demanding role of managing a large arts company. He had been a success at Columbia University's small music theatre space, Miller Theater.  From there he had been briefly, and some say unsuccessfully, at Dallas Opera.  His City Opera programming failed to draw audiences. Ticket sales for the 2010–11 season hovered near a dismal 40 percent of capacity. In 2012 the company announced that it would finally be leaving Lincoln Center, the company's home for more than forty years. 

The final last efforts to raise funds saw acts of desperation such as approaching George Vilar. Vilar has served time for fraud and his name had to be chiseled off the walls of Royal Opera House Covent Garden among other opera companies to whom he had promised donations that were never fulfilled.

The denouement may well have been the final production staged by the company. The work was 'Anna Nicole', a salute to the tragic life and death of blonde model/actress/reality-show-star, Anna Nicole Smith. Anna Nicole had married J. Howard Marshall II, an oil tycoon. The rest of the  Marshall family loathed her, fighting bitterly to keep her from inheriting any of the family estate. Billionaire philanthropist David H. Koch had in the past been a big donor to City Opera. However, Marshall once had been a big investor in Koch Industries. When approached , Koch declined to make the kind of gift that might have saved the New York City Opera - "Out of respect for the wishes of the Marshall family".

Another version of this story by me appeared as a Nonprofit Quarterly Newswire

Really big gifts are transformational

I love being a major gift fundraiser.  I am convinced that it is the most effective and enjoyable form of fundraising.  So I was thrilled to come across a slew of blogs on major gift fundraising this week.

The great thing about major gifts from the perspective of a nonprofit is that they make major initiatives possible.  Terry Burton, blogs "Really big gifts can have a transformational effect on a nonprofit organization". Terry amongst other things is the author of a definitive text on Naming Rights. Naming Rights, you will know often go with transformational gifts. Reading his book is a good way to begin to plan how you will build a naming rights policy into your major gift strategy.

But back to the more recent blogs I mentioned. Fundraising consultant, David Landsdowne talks about Board Misperceptions and Other Issues Related to Major Gifts.  Among the misconceptions he deals with that old chestnut "We need to raise $100,000. Let's just find a hundred people who'll give $1,000 each."  He also reinforces the importance of stating a dollar amount when asking for a gift.  My favourite definition of asking for a gift comes from another fundraising consultant.  He says asking for a gift is simply putting a figure on the table.

The  blog Ten Reasons (Besides Money) That You Should Plan a Capital Campaign Now!  by fundraising consultants Gail Perry and Andrea Kihlstedt is worth a look as you think about your own potential to get stuck into major gift fundraising. This is the question they pose:

"Do you have big dreams for your organization but find yourself limited to taking tiny steps forward? Wouldn't you love to move forward boldly and make an even bigger—maybe even a huge—difference in the world? Are you ready to be inspired and excited by big thoughts and plans?"


The word 'transformational' was used in the title of the comprehensive research paper (download as .pdf) published by the Australian Centre for Philanthropy and Nonprofit Studies. The headline quote in the exec summary says: "Major gifts play a transformational role in terms of making a gift that is really significant and can often make a huge difference to the organisation". The study is worth you dipping into again to remind you that, "Many... see major gifts as the most ‘underpotentialised’ area of community support in Australia". Also that major gifts have "great unrealised potential as a funding model for community need".

Pro Bono News wrote a very good summary of the paper you could revisit: Major Giving Report in Australia - Donor & Fundraiser Perspectives.

Capital Appeals are their own reward  happens to be about the institution where I was first engaged as a major gift fundraiser. It celebrates the end of a successful capital campaign for a Centre for Carbon Innovation at Edinburgh University.  My first, much earlier role as a major gift fundraiser was the start of a campaign for a Centre for Inflammation Research for the same university.

Can you suggest any other good sources of inspiration and advice on major gifts?